Bloomberg, a privately owned financial software, data, and media company
based in New York City, has said that President Muhammadu Buhari
administration is a disappointment so for it inability to turn around
Nigeria’s economy since he assumed office in May 29.
It said when Muhammadu Buhari clinched victory in presidential
elections in March, stocks soared as investors looked to the former
military ruler to reverse decades of economic mismanagement and policy
inertia. However hopes have fizzled over his ability to turn around
Africa’s largest economy and oil producer.
“Money that flowed into stocks and bonds in the West African nation,
which McKinsey & Co. says could become one of the world’s 20 biggest
economies by 2030, is now fleeing as growth prospects diminish along
with oil prices,” Bloomber said. “While Buhari, 72, has prioritized
stamping out the graft that has plagued Nigeria since independence
from Britain in 1960, policy-making appears as uncertain and haphazard
as ever.”
Quoting Ayodele Salami, a chief investment officer of London-based
Duet Asset Management Ltd, who oversees about $500 million of African
equities, Bloomberg said “after the initial euphoria, Nigerians have
become disillusioned.”
“He would probably say that he’s being deliberative and cautious. But
we expected more.” Duet’s Africa fund has cut its investments in the
country to about 24 percent of the total from 38 percent in the last
year.
“Buhari waited five months before naming his cabinet, hasn’t proposed
a clear plan to revive growth and backed foreign-exchange controls
aimed at defending the naira. His retention of gasoline subsidies,
plans to raise spending in the face of declining revenue and silence
about a $5.2 billion fine levied on mobile-phone operator MTN Group
Ltd. have added to investor unease.”
Bloomberg said: “Nigeria’s benchmark stock index has plunged 22
percent since reaching a year-high on April 2, the day after Buhari
was declared the winner of the presidential race against incumbent
Goodluck Jonathan. That’s the third-worst performance globally in the
period, after the bourses in Ukraine and Egypt. The index advanced
12.5 percent in the two days after Jonathan conceded.”
Buhari inherited depleted government coffers and a bureaucracy that
multiple probes have blamed for looting billions of dollars of oil
revenue. The president has said he delayed appointing ministers
because he needed time to vet suitable candidates.
The break has compounded the pain caused by the slide in the price of
crude, which accounts for two-thirds of government revenue and 90
percent of export earnings. Growth, which averaged 6.3 percent
annually over the past decade, is set to slow to a 16-year low of 3.3
percent this year, according to the median estimate of 15 economists
surveyed by Bloomberg.
Many filling stations ran dry this month as the government withheld
fuel subsidies to suppliers, preventing them from restocking.
Lengthening lines forced Buhari to ask lawmakers for permission to pay
413 billion naira ($2 billion) in overdue payments, an amount that
hadn’t been budgeted for.
While next year’s budget has yet to be finalized, Buhari wants to
raise spending by 56 percent, according to a person who attended a
briefing on the government’s plans and asked not to be identified
because the matter is private. Vice President Yemi Osinbajo says the
government plans to spend its way out of a slowing economy and that an
infrastructure fund will be created with public and private financing.
The penalty imposed on MTN’s Nigeria unit last month for failing to
register about 5 million subscribers may be an attempt to plug the
hole in government finances, according to Cobus de Hart, an economist
at NKC Independent Economists. “You cannot deny there might be a
fiscal element to the massive fine,” he said by phone from Paarl, near
Cape Town. “It will make investors a little bit more wary of investing
in Nigeria.”
An even bigger concern for many investors is the authorities’ naira
policy. The Central Bank of Nigeria, with Buhari’s backing, has burned
through $4.3 billion of reserves this year and choked off supply of
foreign exchange to banks and their customers to defend the naira,
even as major oil exporters such as Russia and Colombia have let their
currencies slide. The restrictions prompted JPMorgan Chase & Co. to
remove Nigeria from its local-currency emerging-market bond indexes,
tracked by more than $200 billion of funds, in September, triggering a
selloff in the nations’ assets.
While the naira has been all but fixed at about 198 to 199 per dollar
since March, forward prices suggest it will drop by almost one-fifth,
to 243.5, in a year.
“The number-one issue is the exchange rate,” Andrew Howell, a
Citigroup Inc. frontier markets strategist, said from Lagos. ”Access
to foreign exchange is becoming a widespread problem.”
Buhari has won plaudits from leaders including President Barack Obama
for his efforts to tackle graft. He replaced the management of the
state oil company, which was accused of withholding billions of
dollars from the government, and has stepped up the fight against an
insurgency being waged by Islamist group Boko Haram.
“The degree of transparency we’re starting to get with the new
administration is hugely positive,” Douglas Rowlings, an analyst at
Moody’s Investors Service, said in an interview in Lagos. “It gives
investors the perception that operating in Nigeria will now be done
following proper procedures.”
head of research at Ashmore Group Plc, which oversees almost $60
billion of emerging market assets, Jan Dehn, remains unconvinced that
Buhari is up to the job. The fund manager sold all its Nigerian
government debt in the past year.
“So far the Buhari administration has done all the wrong things,” Dehn
said by phone from London. “Not only has he been incredibly slow in
taking any action, when he finally has taken action on the economic
front it’s been diametrically opposed to sensible policy. That is a
major disappointment given expectations prior to his election,” he
said.